Morris v. Scenera Research, LLC
| Decision Date | 04 January 2012 |
| Docket Number | 09 CVS 19678 |
| Citation | 2012 NCBC 1 |
| Parties | ROBERT PAUL MORRIS, Plaintiff, v. SCENERA RESEARCH, LLC, and RYAN C. FRY, Defendants. |
| Court | Superior Court of North Carolina |
2012 NCBC 1
ROBERT PAUL MORRIS, Plaintiff,
v.
SCENERA RESEARCH, LLC, and RYAN C. FRY, Defendants.
No. 09 CVS 19678
Superior Court of North Carolina, Wake
January 4, 2012
{1} The matter is before the Court on cross-motions for summary judgment. This Memorandum incorporates preliminary rulings of which the Parties were advised by e-mail. This Memorandum is also somewhat abbreviated as the Court seeks to issue a prompt ruling in light of the approaching trial date.
Nature of the Action and Procedural History
{2} This case involves multiple claims and counterclaims arising from Plaintiff Robert Paul Morris's ("Morris") prior employment with Defendant Scenera Research, LLC ("Scenera") of which Defendant Ryan C. Fry ("R. Fry") was an officer. R. Fry's father Stan Fry ("S. Fry") was involved in hiring Morris and is often referred to in the record.
{3} The early procedural history of the case is summarized in this Court's Order on Motions to Compel entered August 26, 2011. The Court issued a final order on the Motions to Compel on October 10, 2011, which then triggered deadlines for filing dispositive motions.
{4} On October 24, 2011, Morris filed his Motion for Partial Summary Judgment ("Morris's Motion") which seeks to dismiss Scenera's Eighth and Eleventh Defenses and the Third and Fourth claims of Scenera's Second Amended Answer and Counterclaim, which related to Morris's asserted breaches of fiduciary duty and refusal to continue to assign invention rights.[1]
{5} Also on October 24, 2011, Scenera and R. Fry filed Defendants' Motion For Summary Judgment ("Defendants' Motion") which seeks judgment in Defendants' favor on Count I of the Counterclaim which seeks to have the Court declare that Scenera owns patent rights to Morris's inventions made during the term of his employment and also seeks to dismiss Counts II, III, and IV of Morris's Complaint which seek relief based on claims of fraud, unjust enrichment, and retaliatory discharge.
{6} The motions were completely briefed, after which the Court held oral argument on December 20, 2011 and gave the Parties informal notice of its rulings by a December 27, 2011 e-mail.
Facts
{7} Many of the background facts are undisputed, such as Morris became a prolific inventor and that at least until late 2008 he assigned the majority of those inventions to Scenera. The primary dispute revolves around whether Morris was obligated to assign those rights or whether his assignment was voluntary, and whether such assignments may now be rescinded because Scenera has refused to pay Morris compensation to which he is entitled. While the issues will have to be more carefully crafted before submission to the jury, primary contested factual issues underlying this key issue and addressed in the cross-motions include: (1) whether Morris was "hired to invent;" (2) if so, whether Morris and Scenera agreed that ownership of any invention was vested in Morris until he elected to offer and Scenera accepted assignment of the inventions in exchange for payments pursuant to a bonus compensation system over and above his base salary; (3) whether that bonus system was cancelled as of the end of 2007 or was instead merely suspended while Scenera considered an alternative compensation system that Morris expected based on discussion with R. Fry; (4) whether Scenera and/or R. Fry promised to offer Morris more favorable compensation in order to induce Morris to continue assigning inventions during 2008, while having no intention to fulfill those promises; (5) whether Morris is entitled at a minimum to recover payments under the bonus system; (6) whether Morris was terminated because he threatened an action to collect those amounts Scenera refused to pay, entitling him to additional statutory penalties; and (7) whether Morris is entitled to rescind assignments already made. As discussed below, the Court determines that some of these issues may be resolved by summary judgment whereas others cannot.
{8} Morris's Complaint includes claims for breach of contract, fraud, unjust enrichment, and retaliatory discharge, and seeks monetary remedies or, at his option, the alternative rescission of invention assignments. Scenera in turn seeks a declaration that Morris was hired to invent as a result of which he was, as a matter of law, obligated to assign any invention to Scenera, narrowing the trial to whether Morris is entitled to bonus compensation. Scenera contends that Morris is not entitled to rescind any assignment he has already made and is obligated to assign inventions made during the term of his employment that he has not yet assigned. Scenera claims that Morris resigned his employment, but even if Scenera terminated him, it had the right to do so for non-pretextual reasons unrelated to his wage claim, particularly because Morris refused to abide by his obligation to continue to make patent assignments. Scenera further claims that Morris breached fiduciary duties owed to Scenera.
{9} Morris was a former IBM employee with substantial training in software. He later was employed by Flashpoint Technologies, a company founded by S. Fry. S. Fry had also formed a company which was initially a holding company known as IPAC. IPAC later became known as Scenera. While employed by Flashpoint, Morris and IPAC entered a Confidentiality Agreement which included mutual non-disclosure obligations and pursuant to which any confidential information remained the property of the disclosing party. (Morris Aff. Ex. B ¶¶ 2, 3.) Morris was not at that time an IPAC employee but contracted with IPAC.
{10} S. Fry hired Morris in 2004 as Scenera's first employee. Morris had a series of discussions with S. Fry preceding this employment, the extent, nature, and significance of which are disputed insofar as they represent any agreement regarding whether Morris was expected to invent for Scenera and whether there was an understanding reached that Morris would own any invention made during the course of his employment until he voluntarily offered to assign and Scenera accepted assignment of any such invention. Morris testified that he expressed an interest in inventing but was neither obligated to nor expected to invent as a part of the regular employment duties he would undertake for Scenera, and that his base salary was for the substantial duties other than inventing for which he was responsible.
{11} Morris and Scenera did not sign a written employment agreement. Morris contends that the Parties understood that the ownership provisions of the Confidential Agreement Morris signed while employed by Flashpoint continued. Scenera contends that there was no such agreement and that once Morris was hired to invent for Scenera, he had no ownership rights in inventions made during the course of that employment.
{12} As discussed in the analysis below, a critical initial factual dispute is then whether Morris was "hired to invent." The resolution of that issue controls the legal principles by which further claims must be decided, including the burden of proof on the issue of ownership. If Morris is correct that he was not hired or specifically charged to invent as a part of his employment, then he would own inventions absent a contrary agreement, and the burden of proving that agreement would fall on the employer. On the other hand, if Morris were hired or directed to invent as a part of his employment, the controlling North Carolina legal standard would vest ownership of the inventions in Scenera absent a contrary agreement, and the burden of proving such an agreement rests with the employee. Morris has a claim to compensation associated with his inventions separate and apart of whether he owned or owns those inventions. It is undisputed that during certain times of Morris's employment, in addition to his base salary, Morris was entitled to receive up to $10, 000.00 for each of his inventions on which Scenera pursued patents, with $5, 000.00 being earned when a patent application was submitted and $5, 000.00 being earned when a patent issued. Scenera concedes that the claim to this compensation survives summary judgment.
{13} Morris proved to be a prolific inventor. By July 2009 when Morris's employment with Scenera ended, Morris contends that the unpaid amount that had accrued under his bonus compensation plan was $210, 000.00. Scenera contends that the bonus compensation system had terminated as of the end of 2007, after which Morris was entitled to no further bonus compensation. While Morris concedes that he voluntarily suspended bonus payments beginning at the end of 2007 as Scenera undertook to formulate an alternative compensation program, he contends that the bonus program was not cancelled, and that he continued to make patent assignments during 2008 only because he knew he was entitled to compensation in addition to his base salary. Morris contends that R. Fry promised that the offered alternative compensation would be tied to Scenera's profitability and more favorably reflect Morris's contribution to that profitability, and better reflect Morris's risk and his reward.
{14} Morris alternatively claims that even if the bonus program had been terminated at year-end 2007, R. Fry in July 2008 promised that the bonus system would be reimplemented for Morris if Scenera did not meet certain conditions by year end, such as providing Morris with an individual written employment contract and an appropriate incentive compensation program, and that these conditions were then not met.
{15} Scenera contests Morris's recollection of these conversations, and further claims...
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